Preferred stocks of Charles Schwab Corp

Guru Investment Theses on Charles Schwab Corp

Baron Funds Comments on The Charles Schwab Corp - Oct 24, 2014

Shares of brokerage firm The Charles Schwab Corp. (SCHW) increased in the third quarter. The company indicated at its biannual investor meeting that earnings should approach the high end of initial guidance. Additionally, the company announced plans to return more cash to shareholders through dividends and buybacks. We believe Schwab is well positioned from a regulatory standpoint and has less exposure to trading commissions than its peers. It has been experiencing consistent and sustained growth in accounts as brokers leave traditional wirehouses. (Michael Baron)

The Fund’s investments in alternative investment money manager The Carlyle Group (CG), and financial intermediary The Charles Schwab Corp. (SCHW), are benefiting from strong performance of equities since the financial panic, which had resulted in increased investor interest in that asset class.

David Rolfe on Charles Schwab Corp. - Mar 14, 2014

Charles Schwab was our largest relative contributor to performance. The stock gained +82% in 2013 – after a gain of 30% in 2012. We trimmed the position throughout the year and fully exited the position at the end of October. Our sale rationale is quite succinct. Schwab remains a best-in-class business, but the stock, in our view, had become less than best in class (read: overvalued)....

For instance, we liquidated our stakes in Charles Schwab during the fourth quarter, as we believe several years of Schwab’s future earnings power were sufficiently recognized by Mr. Market in current prices. While the Company has continued to grow and take profitability share via its superb low-cost, internet-based platform, our analysis of the stock’s valuation suggests that the implied earnings power of the business is not only taking current business momentum into account, but also giving shareholders ample credit for higher short-­term interest rates, even though short-­term rates are currently anchored near zero. Admittedly, valuation is somewhat of a blunt tool, given the wide array of future assumptions, however, we believe that valuation becomes clarified and much sharper too as time passes.

Baron Funds Comments on The Charles Schwab Corp - Feb 20, 2014

Shares of The Charles Schwab Corp. (SCHW) benefitted from favor able capital markets conditions. During the quarter, long-term interest rates moved higher in response to the Federal Reserve's tapering pronouncements. Schwab benefits from higher rates in several ways. The most significant is the potential for Schwab to reduce the fee waivers on its money market funds in a more normalized rate environment. This means Schwab would start recognizing highly profitable management fees on its money market funds, rather than rebating those fees back to shareholders. Schwab also benefitted from the rise in equity markets. Rising valuations of equity mutual funds result in higher management fees to Schwab.

Dodge & Cox Comments on Charles Schwab - Aug 23, 2013

In 2010, the Fund initiated a position in Charles Schwab (SCHW) (a leading U.S. brokerage company) due to its durable business franchise, strong market position, growth prospects, and attractive valuation. As a result of the low interest rate environment in the United States, Schwab had waived some of the fees it charged customers on money market funds and its net interest margins substantially compressed. We believed that the company's revenues and earnings would be significantly higher in a more normal interest rate environment. However, starting in late 2010, the Fed announced additional rounds of quantitative easing and interest rates continued to drop.

Throughout 2011 and 2012, we reaffirmed our investment thesis with the belief that a return to a more normal rate environment could dramatically increase profitability. Through our meetings with management, we were able to assess the company's investment merits and risks, all in the context of valuation. Schwab's highly scalable business model, excellent market position, growing customer base, focused corporate culture, and capable management team were attractive to us. In addition, founder and Chairman Charles Schwab's ownership stake aligned his interests with those of public investors. These factors remain the underpinnings of our current investment thesis.

After considering the regulatory, interest rate, and credit risks inherent in Schwab's business model, we added to the Fund's position in Schwab multiple times throughout 2011 and 2012. The company stands to benefit from a rise in short-term interest rates. Accordingly, investors have responded to the Fed's recent announcement and Schwab's stock price is up 49% year to date. Schwab is a 2.4% position in the Fund.

Top Ranked Articles about Charles Schwab Corp

Shares of brokerage firm The Charles Schwab Corp. (SCHW) increased in the third quarter. The company indicated at its biannual investor meeting that earnings should approach the high end of initial guidance. Additionally, the company announced plans to return more cash to shareholders through dividends and buybacks. We believe Schwab is well positioned from a regulatory standpoint and has less exposure to trading commissions than its peers. It has been experiencing consistent and sustained growth in accounts as brokers leave traditional wirehouses. (Michael Baron) Read more...

Charles Schwab was our largest relative contributor to performance. The stock gained +82% in 2013 – after a gain of 30% in 2012. We trimmed the position throughout the year and fully exited the position at the end of October. Our sale rationale is quite succinct. Schwab remains a best-in-class business, but the stock, in our view, had become less than best in class (read: overvalued).... Read more...

Business Description

Charles Schwab Corp was incorporated in Delaware in 1986. The Company, through its subsidiaries, is engaged in securities brokerage, banking and related financial services. The Company provides financial services to individuals and institutional clients through two segments namely Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services to individual investors, retirement plan services, and corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services to independent investment advisors (IAs), and retirement business services to independent retirement plan advisors and recordkeepers whose plan assets are held at Schwab Bank. The Investor Services segment provides retail brokerage and banking services to individual investors. Through the Advisor Services segment, the Company provides custodial, trading, and support services to IAs. To attract and serve IAs, the Company has a dedicated sales force and service teams assigned to meet their needs. IAs who custody client accounts at Schwab may use proprietary software that provides them with up-to-date client account information, as well as trading capabilities. The Advisor Services website is the core platform for IAs to conduct daily business activities online with Schwab, including submitting and retrieving client account information and viewing news and market information. This platform provides IAs with a comprehensive suite of electronic and paper-based reporting capabilities. The Company offers online cashiering services, as well as internet-based eDocuments sites for both IAs and their clients that provide multi-year archiving of online statements, trade confirms and tax reports, along with document search capabilities. On September 1, 2011, the Company completed its acquisition of all of the outstanding common shares of optionsXpress Holdings, Inc. (optionsXpress), an online brokerage firm focused on equity option securities and futures. The optionsXpress brokerage platform provides active investors and traders trading tools, analytics and education to execute a variety of investment strategies.

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